strategy

Product Durability

Product Durability Jonathan Poland Jonathan Poland //www.jonathanpoland.com/wp-content/uploads/2023/01/jp-logo.png September 29, 2023 September 29, 2023

A durable product, often referred to as a durable good, is a product that does not quickly wear out or, more specifically, one that yields utility over time rather than being completely consumed in one use. Durable products have a long lifespan and are used over a longer period, typically three years or more. The longevity of these products differentiates them from non-durable products, which are consumed quickly or have a short lifespan.

Examples of durable products include:

Appliances: Refrigerators, washing machines, ovens, etc.
Furniture: Tables, chairs, sofas, beds, etc.
Vehicles: Cars, trucks, motorcycles, bicycles, etc.
Electronics: Televisions, computers, mobile phones, etc.
Tools: Hammers, saws, drills, etc.

In contrast, non-durable products (or non-durable goods) are items that are consumed quickly or have a short lifespan. Examples include food, beverages, cleaning supplies, and many personal care products.

In economic analyses and forecasts, the distinction between durable and non-durable goods is significant. Durable goods often require a more significant investment, and their sales can be an indicator of consumer confidence in the economy. When consumers expect economic stability or growth, they are more likely to invest in durable goods. Conversely, during economic downturns, consumers might delay purchasing durable goods due to uncertainty.

What makes a product durable?

Making products more durable is essential for both environmental sustainability and consumer satisfaction. Durable products reduce waste, save resources, and often provide better value for money in the long run. Here are some strategies and considerations for making products more durable:

Material Selection:

Use high-quality materials that are known for their longevity.
Opt for materials that are resistant to wear, corrosion, and environmental factors.

Design for Durability:

Prioritize a design that minimizes weak points or areas prone to wear.
Consider modular designs that allow for easy replacement of parts.
Avoid trends that can make a product seem outdated quickly.

Manufacturing Quality:

Implement strict quality control processes to ensure consistent production standards.
Use manufacturing techniques that enhance durability, such as double stitching for clothing or reinforced joints for furniture.

Maintenance and Repair:

Design products to be easily maintainable. For instance, make sure parts that are likely to wear out (like batteries in electronics) are replaceable.
Provide clear maintenance instructions to users.
Offer repair services or partner with repair shops.

Protective Features:

Include features that protect the product from damage, like shock-absorbing cases for electronics or rust-resistant coatings for metal products.

Testing:

Conduct rigorous testing to simulate long-term use and identify potential weak points.
Use feedback from these tests to refine the product design.

Consumer Education:

Educate consumers on proper care and maintenance to extend the product’s life.
Offer warranties that reflect confidence in the product’s durability.

Sustainability and Eco-design:

Consider the entire lifecycle of the product, from raw material extraction to end-of-life disposal.
Design for recyclability, so even when the product reaches the end of its life, its materials can be reused or recycled.

Feedback Loop:

Encourage feedback from customers about product durability and use this feedback for continuous improvement.
Monitor returns and complaints to identify and address common durability issues.

Regulations and Standards:

Stay updated with industry standards and regulations related to product durability.
Seek certifications that vouch for the product’s durability and quality.

Avoid Planned Obsolescence:

Resist the business model of designing products to have a limited useful life so that consumers will have to buy replacements. Instead, build a reputation for long-lasting products.

Importance of Building for Durability

Building a durable product is crucial for a variety of reasons, spanning economic, environmental, ethical, and brand-related considerations. Here are some of the primary reasons why product durability is important:

Consumer Satisfaction and Trust:

Durable products meet or exceed consumer expectations, leading to increased satisfaction.
Consumers are more likely to trust and remain loyal to brands that offer long-lasting products.

Economic Value:

Durable products often provide better long-term value for consumers, even if they are more expensive initially.
Companies can reduce costs related to returns, repairs, and warranty claims.

Environmental Responsibility:

Durable products reduce the need for frequent replacements, leading to less waste in landfills.
They help conserve resources by reducing the frequency of manufacturing new products.
Reduced production means less energy consumption and fewer emissions.

Ethical Considerations:

Producing durable goods can be seen as a more ethical business practice, as it avoids the controversial strategy of planned obsolescence.
It respects the consumer’s investment in the product.

Brand Reputation and Positioning:

Companies known for producing durable products can position themselves as premium or quality-driven brands.
Positive word-of-mouth and reviews can enhance a brand’s reputation.

Sustainability and Corporate Social Responsibility (CSR):

Durability aligns with the principles of sustainability and CSR, as companies take responsibility for the entire lifecycle of their products.
Companies can market their commitment to sustainability, appealing to environmentally-conscious consumers.

Economic Stability:

Durable products can lead to more predictable and stable sales patterns, as opposed to the boom-and-bust cycle of products with short lifespans.
It can also lead to diversified revenue streams, such as maintenance and repair services for long-lasting products.

Reduced Total Cost of Ownership:

For many products, especially those in the B2B sector, the total cost of ownership (including maintenance, repairs, and downtime) is a significant consideration. Durable products can offer a lower total cost over their lifespan.

Competitive Advantage:

In markets saturated with similar products, durability can be a distinguishing feature that sets a product apart from its competitors.

Supports Circular Economy:

Durable products fit well within the circular economy model, where products are designed to be used, repaired, and recycled, rather than following the traditional linear “take, make, dispose” model.

By focusing on durability, companies can build trust with consumers, reduce returns and warranty claims, and contribute to a more sustainable and less wasteful society. In summary, building a durable product is not only beneficial for the consumer but also for the company and the environment. It fosters trust, promotes sustainability, and can lead to long-term economic benefits.

Business Models

Business Models Jonathan Poland Jonathan Poland //www.jonathanpoland.com/wp-content/uploads/2023/01/jp-logo.png September 29, 2023 September 29, 2023

Business models define how a company creates, delivers, and captures value. There are numerous business models, each tailored to specific industries, customer segments, and value propositions. Today, most businesses are forced to operate within multiple models to build a repeating customer base. Here’s an overview of the top business models.

Brick and Mortar: Traditional physical business model where customers visit a store or office. Examples include retail stores, restaurants, and clinics.
E-commerce: Selling products or services online. This can be through a company’s own website or through platforms like Amazon or eBay.
Subscription: Customers pay a recurring fee to access a product or service. Examples include Netflix, Spotify, and many software-as-a-service (SaaS) companies.
Freemium: A combination of “free” and “premium”. Basic services are provided for free, but advanced features or services come at a cost. Examples include Dropbox and many mobile apps.
Affiliate Marketing: Companies earn commissions by promoting other company’s products or services. Bloggers and influencers often use this model.
Franchise: A franchisee pays an initial fee and ongoing royalties to a franchisor. In return, the franchisee gains the use of a trademark, ongoing support, and the right to use the franchisor’s system of doing business. Examples include McDonald’s and Subway.
Advertising: Revenue is generated by providing advertising space. Many online platforms, like Google and Facebook, and traditional media outlets, like TV and radio, use this model.
Brokerage: Acts as an intermediary between buyers and sellers. The broker earns a fee upon the successful sale or other transaction. Real estate agents and stock brokers operate on this model.
Razor and Blades: Companies sell one item at a low price (or give it away for free) and then make profits on the sale of refills or associated products. The classic example is razors (cheap) and blades (expensive).
Crowdsourcing: Outsourcing tasks to a large group of people or community (the “crowd”) through an open call. Wikipedia and Kickstarter are examples.
Peer-to-Peer (P2P): Enables individuals to lend or borrow from each other, bypassing traditional institutions like banks. Examples include Airbnb and Uber.
Direct Sales: Products are sold directly to the consumer without a fixed retail location. Examples include Tupperware and Avon.
Licensing: Allows others to use intellectual property like patents, trademarks, copyrights, or brands for a fee.
Agency Model: Acts on behalf of the supplier and sells to customers. The agent earns a commission on each sale.
Bait and Hook: Similar to the razor-blades model. The basic product is sold cheaply or given away for free, while the consumables are sold at a high margin.
Data Selling: Companies collect data and then sell it to other companies who can use it for various purposes, including advertising and market research.
Reverse Auction: Customers state what they’re willing to pay for a service, and providers bid to offer their services. Priceline is an example.
Low Touch vs. High Touch: In a low-touch model, customers can use the product or service without much interaction with the company. In a high-touch model, there’s significant interaction and support.
Marketplace: Platforms that connect buyers and sellers, taking a fee from each transaction. Examples include Etsy and eBay.
Wholesale: Selling products in bulk at a discount to retailers who then sell them to end customers.
Dropshipping: Retailers don’t keep products in stock. Instead, they buy the product from a third party and have it shipped directly to the customer.

This is by no means an exhaustive list, and many businesses operate using a combination of these models. Additionally, as industries evolve and technology advances, new business models continue to emerge.

Payback Theory

Payback Theory Jonathan Poland Jonathan Poland //www.jonathanpoland.com/wp-content/uploads/2023/01/jp-logo.png September 29, 2023 September 29, 2023

Let’s say you live in a town with two bakeries for sale at $1 million each. Both offer similar products with almost exactly the same type of customer and asset structure — one earns $100,000, the other $150,000.

Which one do you buy?

The one that makes more money! That one has the highest yield, which in this case is the second bakery. In fact, if these numbers held up, bakery number two would pay you back in less than 7 years, a full 3 years ahead of the first one. All things being equal, this is an easy calculation. All things are rarely so cut and dry.

To know whether an asset is worth buying, you have to know the profit it generates compared to the price you’re paying, otherwise you’re simply speculating on whether or not you can sell it at a later date for a higher price. Not all art or Jordan sneakers fetch higher prices.

For example, if you buy a house for $500,000 and lease it for $2,500 a month, the annual yield before expenses is 6%. For private businesses its the profit for the price you paid. However, in the public markets, companies listed on big exchanges like the NYSE or NASDAQ tend to remain in business a lot longer and are thus valued at higher multiples of earnings. This means looking for growth potential at a fair or discounted market price.

Very rarely will investors acquire shares in an excellent growth company at prices where payback periods are apparent. These companies must grow into the high yield prices. An example from the world’s most valuable company, as of 2023.

2008
Apple (AAPL)
Value: $76 billion
Profit: $6.1 billion
Yield: 8.0%

2018
Apple (AAPL)
Value: $1.01 trillion
Profit: $56 billion
Yield: 73.9% on 2008

Payback Period

The payback period is the length of time it takes for an investment to recoup its initial cost and start generating a profit. It is typically measured in months or years and is calculated by dividing the initial cost of the investment by the expected cash flows. The payback period is used to evaluate an investment and compare it to other potential investments or strategies based on their projected returns. It is calculated by discounting future cash flows to their net present value and comparing them to the initial cost of the investment. The shorter the payback period, the quicker the investment is expected to start generating a return.

The payback period is a financial measure used to evaluate the feasibility of an investment. It is the length of time it takes for an investment to recoup its initial cost and start generating a profit.

To calculate the payback period, the initial cost of the investment is divided by the expected cash flows. For example, if an investment has an initial cost of $100,000 and is expected to generate annual cash flows of $20,000, the payback period would be five years ($100,000 / $20,000 = 5).

The payback period is often used to compare different investments or strategies based on their projected returns. A shorter payback period is generally considered more favorable, as it indicates that the investment is expected to start generating a return more quickly.

However, it is important to note that the payback period does not take into account the time value of money, which means that it does not consider the fact that money has a different value over time. For this reason, the payback period is often used in conjunction with other financial measures, such as the internal rate of return (IRR) or the net present value (NPV), which do consider the time value of money.

In conclusion, the payback period is a useful tool for evaluating the potential of an investment by considering the length of time it takes for the investment to start generating a profit. It is important to consider the payback period in conjunction with other financial measures to get a complete picture of an investment’s potential returns.

More Examples

An investor buys a rental property for $200,000, and the property generates $1,000 in monthly rental income. The payback period for this investment would be 200,000 / 1,000 = 200 months, or approximately 16.7 years.
A company invests $500,000 in a new manufacturing plant, and the plant generates an additional $100,000 in annual profits. The payback period for this investment would be 500,000 / 100,000 = 5 years.
An individual invests $10,000 in a new business venture, and the business generates $1,500 in monthly profits. The payback period for this investment would be 10,000 / 1,500 = 6.7 months.

Risk-Reward Ratio

Crucial to the payback theory is the risk-reward ratio is a measure that compares the potential for losses to the potential for gains for a particular action. Risk management aims to optimize this ratio, taking into account an organization’s risk tolerance, rather than necessarily eliminating all risk. The goal is often to minimize the risk relative to the potential reward. The following are a few examples of a risk/reward ratio.

Investing

Based on a proprietary estimation, an investor guesses that the S&P 500 has equal chance of going up 20% or going down 5% in the next year. The investor sees the risk/reward of 1:4 as attractive and buys into the index.

Product Development

An electronics company is considering launching a line of 3D printers. The development costs are significant and the company estimates there is an equal change of net income of $3 billion or a net loss of $2 billion from the product within the first 5 years. The company views the risk reward of 2:3 as unattractive and decides not to develop 3d printers.

Marketing

A luxury hotel is considering changing their pricing strategy to add a resort fee of $33 a day. They know that such fees are unpopular and the hotel has recently experienced declining ratings on popular travel review sites. They calculate that the price change will generate revenues of $1 million dollars but that there is a 50% chance of a customer backlash that will cost $12 million dollars in lost revenue due to a lower occupancy rate. The resulting risk/reward ratio is 6:1 meaning that the price increase is a risky proposition that’s unlikely to payback.

Types of Risk/Reward Ratio

The risk-reward ratio is a simple mathematical equation: risk / reward that can be used to evaluate strategies, tactical actions and processes for their potential payback. For simplicity, the ratio is often expressed as gains and losses that are estimated to have equal probability. More accurate methods model risk as a risk matrix or probability distribution.

Trademarks

Trademarks Jonathan Poland Jonathan Poland //www.jonathanpoland.com/wp-content/uploads/2023/01/jp-logo.png September 29, 2023 September 29, 2023

Trademarks are used to identify and distinguish goods and services from those of others in the marketplace. Here’s what can typically be trademarked:

Words: This includes brand names, slogans, and any other word that identifies the source of goods or services. For example, “Nike” and “Just Do It” are both trademarked by Nike, Inc.
Symbols and Logos: These are graphical representations that identify a brand. The Nike “swoosh” is a well-known example.
Colors: In some cases, a specific color associated with a product or service can be trademarked if it has acquired a secondary meaning and is non-functional. For instance, the particular shade of purple used for Cadbury chocolate wrappers is trademarked in some jurisdictions.
Sounds: Sounds that distinguish a brand can be trademarked. The MGM lion’s roar and the NBC chimes are examples of trademarked sounds.
Shapes: The shape of a product or its packaging can be trademarked if it’s distinctive. For example, the shape of the Coca-Cola bottle is trademarked.
Scents: While rare, some scents have been trademarked when they are non-functional and serve to identify the source of a product.
Trade Dress: This refers to the overall look and feel of a product or its packaging. It can include features such as size, shape, color, texture, and graphics. For it to be trademarked, it must be non-functional and distinctive.
Phrases and Slogans: Short phrases or slogans that promote or identify a brand can be trademarked. For example, “Have it your way” by Burger King.
Combinations: Any combination of the above elements can also be trademarked. For instance, a logo that includes both words and symbols.

It’s important to note that for something to be trademarked, it typically needs to be distinctive and not merely descriptive or generic for the goods/services it represents. Additionally, the trademark must be used in commerce, meaning it’s used in the sale of goods or services. Lastly, trademark laws and what can be trademarked might vary from one jurisdiction to another. It’s always a good idea to consult with a trademark attorney or expert in the specific jurisdiction where you intend to register a trademark.

Why Trademark?

Obtaining a trademark can be a crucial step for businesses and individuals who want to protect their brand identity. Here are some scenarios when it makes sense to get a trademark:

Brand Protection: If you’ve developed a unique brand name, logo, slogan, or any other identifier for your business, product, or service, trademarking helps protect it from unauthorized use by competitors.
Market Presence: If you’re planning to expand your business or have a significant market presence, a trademark can prevent others from capitalizing on your brand’s reputation.
Franchising or Licensing: If you’re considering franchising your business or licensing your brand to third parties, having a registered trademark can be essential for legal clarity and protection.
E-commerce and Online Presence: With the rise of online marketplaces and e-commerce platforms, having a trademark can help you take action against counterfeit products or unauthorized sellers.
Prevent Confusion: A trademark ensures that consumers can distinguish your products or services from those of competitors, preventing confusion in the marketplace.
Asset Building: Trademarks can become valuable assets. Over time, as your brand gains recognition and trust, the value of your trademark can increase, potentially making your business more attractive to investors or buyers.
Legal Advantage: Owning a registered trademark can provide significant legal advantages in disputes. It can serve as prima facie evidence of ownership and validity, making it easier to enforce your rights.
Geographical Expansion: If you’re planning to expand your business to other regions or countries, having a trademark in your home country can sometimes make it easier to register your trademark in other jurisdictions.
Deterrence: A registered trademark can act as a deterrent, discouraging others from using a similar name or logo, as they’ll be aware of potential legal consequences.
Monetization: Trademarks can be monetized through licensing agreements, allowing others to use your brand in exchange for licensing fees.

However, before pursuing a trademark, consider the following:

Cost: Trademark registration involves fees, and defending a trademark can be costly.
Research: Ensure that your desired trademark isn’t already in use or too similar to existing trademarks to avoid potential legal disputes.
Maintenance: Trademarks require periodic renewals and, in some jurisdictions, proof of continued use.

Given these considerations, if you believe that the benefits of having a trademark outweigh the costs and potential challenges, and it aligns with your business strategy, it might be the right time to pursue trademark registration. While you can obtain a trademark without a lawyer, consulting with a trademark attorney can provide clarity tailored to your specific situation.

How It Works

Registering a trademark with the United States Patent and Trademark Office (USPTO) involves several steps. Here’s a general overview of the process:

Preliminary Search: Before filing, it’s advisable to conduct a search on the USPTO’s Trademark Electronic Search System (TESS) to see if a similar trademark is already registered or pending. This can help avoid potential conflicts and refusals.
Determine Filing Basis: Decide on your filing basis. The most common are:
- Use in Commerce: You’re already using the trademark in commerce.
- Intent to Use: You haven’t used the trademark yet but intend to in the near future.
Application Submission: File your application online using the Trademark Electronic Application System (TEAS). There are different forms available (e.g., TEAS Plus, TEAS Standard), each with its own requirements and fees.
USPTO Review: After submission, a USPTO examining attorney will review your application. This can take several months. The attorney will check for compliance with legal requirements and potential conflicts with existing trademarks.
Office Actions: If there are issues with your application, the examining attorney will issue an “Office Action” detailing the problems. You’ll have six months to respond to this action. If you don’t respond in time, your application will be abandoned.
Publication: If the examining attorney approves your application, it will be published in the “Official Gazette,” a weekly USPTO publication. This gives third parties a chance to oppose the registration if they believe it would infringe on their rights.
Opposition Period: After publication, there’s a 30-day window during which third parties can file an opposition to your trademark. If opposed, proceedings will take place before the Trademark Trial and Appeal Board (TTAB).
Registration: If there’s no opposition, or if you successfully overcome an opposition, the USPTO will register the trademark (for an “Intent to Use” application, you’ll first need to show proof of use).
Maintenance: Once registered, you must maintain the trademark. This includes filing specific documents:
- Declaration of Use between the 5th and 6th year after registration.
- Renewal every 10 years after registration.
Use the ® Symbol: Once registered, you can use the ® symbol with your trademark. Before registration, you can use “TM” for goods or “SM” for services to indicate that you’re claiming trademark rights.

How long it lasts

The duration of a trademark varies by jurisdiction, but in many countries, a trademark can last indefinitely as long as certain conditions are met. Here’s a general overview:

Initial Duration: In many jurisdictions, including the United States, a registered trademark initially lasts for 10 years.
Renewal: After the initial period, a trademark can typically be renewed indefinitely in successive periods (often every 10 years). However, the trademark owner must continue to use the mark in commerce and meet other renewal requirements.
Proof of Use: To maintain the trademark, the owner may need to show proof of continued use at certain intervals. For instance, in the U.S., between the 5th and 6th year after the initial registration, the owner must file a “Declaration of Use” to confirm the mark is still in use. If not filed, the trademark registration will be canceled.
Non-use: If a trademark isn’t used for a certain period (commonly 3-5 years) without a valid reason, it may become vulnerable to cancellation for non-use. This means other parties can challenge the trademark’s validity based on the owner’s lack of use.
Renewal Fees: Each renewal typically requires a fee. Failure to pay the renewal fee can result in the expiration of the trademark registration.
Other Maintenance Documents: Depending on the jurisdiction, there might be other documents or affidavits that the trademark owner needs to file periodically to maintain the trademark.

Notable Examples

Here are 50 well-known trademarked slogans/phrases and the companies they’re associated with:

“Just Do It” – Nike
“I’m Lovin’ It” – McDonald’s
“Think Different” – Apple
“Have It Your Way” – Burger King
“Open Happiness” – Coca-Cola
“Taste the Rainbow” – Skittles
“Red Bull Gives You Wings” – Red Bull
“The Happiest Place On Earth” – Disneyland/Disney World
“Can You Hear Me Now? Good.” – Verizon
“Because You’re Worth It” – L’Oréal
“Finger Lickin’ Good” – KFC
“Every Little Helps” – Tesco
“Impossible Is Nothing” – Adidas
“Eat Fresh” – Subway
“Save Money. Live Better.” – Walmart
“The Best a Man Can Get” – Gillette
“Snap, Crackle, Pop” – Rice Krispies
“Mmm Mmm Good!” – Campbell’s Soup
“It Gives You Wings” – Red Bull
“There’s No Place Like Home” – Zillow
“Share Moments. Share Life.” – Kodak
“The Quicker Picker Upper” – Bounty
“Like a Good Neighbor, State Farm is There” – State Farm
“The Breakfast of Champions” – Wheaties
“Have a Break, Have a Kit Kat” – Kit Kat
“Melts in Your Mouth, Not in Your Hands” – M&M’s
“What’s in Your Wallet?” – Capital One
“You’re in Good Hands” – Allstate
“America Runs on Dunkin’” – Dunkin’ Donuts
“We Bring Good Things to Life” – General Electric
“When It Absolutely, Positively Has to Be There Overnight” – FedEx
“Connecting People” – Nokia
“Let’s Go Places” – Toyota
“Zoom Zoom” – Mazda
“The Ultimate Driving Machine” – BMW
“Drivers Wanted” – Volkswagen
“Fly the Friendly Skies” – United Airlines
“Don’t Leave Home Without It” – American Express
“Tastes So Good, Cats Ask for It by Name” – Meow Mix
“The King of Beers” – Budweiser
“Where’s the Beef?” – Wendy’s
“Good to the Last Drop” – Maxwell House
“It’s Everywhere You Want to Be” – Visa
“The Few, The Proud, The Marines” – U.S. Marine Corps
“The World’s Online Marketplace” – eBay
“The Snack That Smiles Back” – Goldfish Crackers
“Betcha Can’t Eat Just One” – Lay’s
“Keeps Going and Going and Going” – Energizer
“A Diamond Is Forever” – De Beers
“When You Care Enough to Send the Very Best” – Hallmark

These slogans are designed to be memorable and to convey a particular message or feeling associated with the brand. They play a significant role in advertising and brand recognition.

Pricing 101

Pricing 101 Jonathan Poland Jonathan Poland //www.jonathanpoland.com/wp-content/uploads/2023/01/jp-logo.png September 29, 2023 September 29, 2023

Pricing refers to the process of determining the value that a business will receive in exchange for its products or services. It’s the amount of money that customers have to pay to acquire a product or service. Pricing is a critical aspect of business strategy and can significantly impact a company’s profitability, market share, and overall brand perception. Here’s an overview of pricing in terms of business:

Objectives of Pricing

Profit Maximization: Setting prices to achieve the highest possible profit.
Sales Maximization: Setting prices to achieve the highest sales volume, even if it means lower profits.
Market Penetration: Setting lower prices to attract a large number of customers and gain a significant market share.
Market Skimming: Setting higher prices for new and innovative products to “skim” maximum revenue layer by layer from segments willing to pay more.
Competitive Matching: Setting prices based on what competitors are charging.
Survival: Setting prices low to cover costs and stay in the market.

Factors Influencing Pricing

Costs: The fundamental factor is the cost of producing the product or service. This includes both variable and fixed costs.
Demand: The willingness and ability of consumers to purchase a product at different prices.
Competition: Prices might be influenced by what competitors are charging for similar products or services.
Economic Conditions: Inflation, deflation, and other economic factors can influence pricing.
Government Regulations: In some industries, the government might regulate how much can be charged for products or services.
Brand Image and Value Proposition: Premium brands might charge higher prices due to the perceived value they offer.

Pricing Strategies

Cost-Plus Pricing: Adding a markup percentage to the cost of the product.
Value-Based Pricing: Setting prices based on the perceived value to the customer rather than the cost of the product.
Dynamic Pricing: Adjusting prices based on current market demands.
Freemium: Offering basic services for free while charging for advanced features.
Bundle Pricing: Selling multiple products together at a reduced price.
Psychological Pricing: Setting prices that have a psychological impact, e.g., $9.99 instead of $10.

Challenges in Pricing

Finding the Right Balance: Pricing too high might alienate potential customers, while pricing too low might hurt profitability.
Dealing with Competitive Price Wars: Competitors might lower their prices, forcing a business to adjust its pricing strategy.
Evolving Consumer Perceptions: As brands evolve and markets change, the perceived value of products can shift, affecting pricing.
Global Pricing: For businesses operating internationally, they must consider currency fluctuations, local market conditions, and varying costs.

Monitoring and Adjusting Prices

It’s essential for businesses to regularly review and adjust their prices based on market conditions, costs, and other relevant factors. Monitoring and adjusting prices is a dynamic process that allows businesses to remain competitive, maximize profits, and ensure they are delivering value to their customers. Like most business activities this is not a one-time activity but an ongoing process. It requires a combination of data analysis, market understanding, and strategic foresight to ensure that a business remains profitable while meeting the needs and expectations of its customers. Here’s a deeper dive into the importance and methods of monitoring and adjusting prices:

Why Monitor and Adjust Prices?

Changing Market Conditions: Economic fluctuations, seasonal demand variations, and other external factors can influence the optimal price point.
Competitive Landscape: New entrants, changes in competitor pricing, or shifts in market share can necessitate price adjustments.
Cost Variations: Changes in production, labor, or material costs can impact the profitability of current price points.
Customer Feedback and Sales Data: If products are not selling as expected or if there’s a surge in demand, it might indicate a need for price adjustment.
Product Lifecycle: As products move through their lifecycle—from introduction to growth, maturity, and decline—the optimal pricing strategy may change.

Methods for Monitoring Prices:

Price Tracking Software: Tools that automatically monitor competitor prices and market trends.
Regular Financial Analysis: Periodic reviews of profit margins, sales volumes, and other financial metrics.
Market Research: Surveys, focus groups, and other methods to gauge customer perceptions and willingness to pay.
Sales Feedback: Direct feedback from the sales team about customer reactions and competitor pricing strategies.
Strategies for Adjusting Prices:

Discounting: Temporary price reductions to boost sales, clear out inventory, or attract new customers.

Surge Pricing: Increasing prices when demand is high, commonly seen in industries like ride-sharing or hotel bookings.
Versioning: Offering different versions of a product at different price points to cater to various customer segments.
Loyalty Pricing: Offering special prices or discounts to loyal or long-term customers.
Geographic Pricing: Adjusting prices based on the location, taking into account factors like purchasing power, local competition, and logistical costs.

Challenges in Adjusting Prices:

Customer Perception: Frequent price changes can confuse or alienate customers. It’s crucial to communicate the reasons for price adjustments transparently.
Operational Challenges: Especially in brick-and-mortar settings, changing prices can require updates to systems, labels, and promotional materials.
Contractual Obligations: Some businesses may have contracts with clients that specify prices for a set period, limiting flexibility.

Best Practices:

Test Before Implementing: Before rolling out a new pricing strategy, test it in a specific region or segment to gauge its impact.
Stay Informed: Continuously monitor industry news, competitor actions, and market trends.
Engage with Customers: Understand their price sensitivity and how they perceive value.
Review Regularly: Set periodic reviews, whether monthly, quarterly, or annually, to assess and adjust pricing strategies.

Pricing Examples

Each of these pricing strategies can be effective depending on the industry, target audience, and specific goals of the business.

Cost-Plus Pricing: A bakery determines the cost of producing a loaf of bread and adds a fixed percentage as markup to determine its selling price.
Dynamic Pricing: Airlines adjust ticket prices in real-time based on factors like demand, time to departure, and seat availability.
Penetration Pricing: A new streaming service offers a significantly discounted subscription rate to quickly attract users and gain market share.
Skimming Pricing: A tech company releases a cutting-edge smartphone and sets a high initial price, targeting early adopters willing to pay a premium.
Value-Based Pricing: A luxury watch brand prices its products based on the perceived prestige and status they offer, rather than just production costs.
Freemium: A software company offers a basic version of its app for free but charges for advanced features or functionalities.
Bundle Pricing: A cable company offers a package deal for TV, internet, and phone services at a reduced rate compared to purchasing each separately.
Psychological Pricing: Retail stores price products at $9.99 instead of $10, making them appear more affordable.
Geographic Pricing: An e-commerce platform varies its product prices based on the customer’s location, considering factors like shipping costs and local purchasing power.
Tiered Pricing: A cloud storage provider offers different pricing levels based on the amount of storage space a customer needs.
Loss Leader Pricing: A supermarket sells certain popular items at a loss to attract customers, hoping they’ll make additional purchases.
Anchor Pricing: An online retailer displays the original price next to the discounted price to highlight the savings and make the deal more attractive.
Pay What You Want: A musician allows fans to pay any amount they wish for a digital album, even if it’s zero.
Subscription Pricing: A gym charges members a monthly fee for unlimited access rather than a per-visit charge.
Decoy Pricing: A magazine offers three subscription options, with the middle option strategically priced to make the most expensive option seem more attractive.
High-Low Pricing: A fashion retailer regularly prices items high but frequently offers sales, creating a sense of urgency among shoppers.
Hourly Pricing: A consultancy charges clients based on the number of hours worked on a project.
Performance-Based Pricing: An advertising agency charges clients based on the results achieved, such as the number of leads generated.
Competitive Pricing: An online bookstore sets its prices based on what major competitors are charging for the same books.
Economy Pricing: A no-frills airline offers basic services at a low price, charging extra for amenities like checked baggage or in-flight meals.

Time To Value

Time To Value Jonathan Poland Jonathan Poland //www.jonathanpoland.com/wp-content/uploads/2023/01/jp-logo.png September 29, 2023 September 29, 2023

Overview

Time to Value (TTV) is a business concept that refers to the period it takes for a customer to realize the value or benefit from a product, service, or solution after its acquisition. In other words, it’s the time between when a customer makes an investment (in terms of money, time, or resources) and when they start seeing returns or benefits from that investment.

Here’s why Time to Value is important in a business context:

Customer Satisfaction: A shorter TTV can lead to increased customer satisfaction. When customers quickly see the benefits of their investment, they are more likely to be satisfied with their purchase and have a positive perception of the product or service.
Competitive Advantage: In industries where products or services are similar, a shorter TTV can be a differentiator. Companies that can deliver value faster than their competitors may have an edge in the market.
Customer Retention: Customers who realize value quickly are less likely to churn or switch to a competitor. They are more likely to stick with a product or service that provides rapid benefits.
Referrals and Word of Mouth: Satisfied customers who see quick returns on their investments are more likely to recommend the product or service to others, leading to organic growth for the business.
Financial Health: For businesses, especially those with a subscription model, a shorter TTV means that customers start seeing benefits before their next payment cycle. This can lead to improved cash flow and reduced churn.
Resource Optimization: Understanding and optimizing TTV can help businesses allocate resources more efficiently. For instance, if a particular feature is slowing down TTV, resources can be redirected to improve or replace that feature.
Feedback Loop: A shorter TTV allows for quicker feedback from customers. This can help businesses iterate on their offerings and make improvements based on real-world usage.
Trust Building: Delivering value promptly can help in building trust with the customers. When customers see that a business delivers on its promises quickly, they are more likely to trust that business in future interactions.

Time to Value is a critical metric for businesses as it directly impacts customer satisfaction, retention, and the overall success of a product or service in the market. By focusing on reducing TTV, businesses can enhance their customer experience and drive growth.

Marketing with TTV

Formulating a marketing campaign around Time to Value (TtV) involves highlighting the speed and efficiency with which customers can derive value from a product or service. The campaign would emphasize the immediate benefits and quick results that customers can expect. Here’s a step-by-step approach to creating such a campaign:

Identify the TTV: Before you can market it, you need to understand and quantify the TTV for your product or service. How quickly do customers typically see results? Gather data and testimonials if possible.
Target Audience Segmentation: Identify the segment of your audience that values quick results. This could be businesses in fast-paced industries, consumers looking for immediate solutions, or any other group that prioritizes speed and efficiency.
Craft a Compelling Message: Your core message should revolve around the quick benefits your product or service offers. Phrases like “instant results,” “see benefits in just days,” or “immediate value” can be effective.
Use Real-world Examples and Testimonials: Showcase real customers who have experienced rapid value from your offering. Their stories can make your claims more credible.
Visual Representation: Use graphics, charts, or animations to visually represent how quickly customers can achieve value compared to competitors or traditional methods.
Offer Guarantees: If you’re confident in your TTV, consider offering guarantees or trials. For instance, “Experience the benefits in 7 days or your money back.”
Educational Content: Create blog posts, videos, or infographics that educate your audience about the importance of TtV and how your solution delivers it.
Leverage Social Proof: Use reviews, ratings, and testimonials on social media and your website to showcase the quick value customers have derived.
Engage Influencers: Partner with industry influencers who can vouch for the rapid value of your product or service.
Retargeting Campaigns: For potential customers who’ve shown interest but haven’t converted, use retargeting ads emphasizing TTV to bring them back.
Monitor and Optimize: As with any marketing campaign, monitor your results. Use analytics to see which messages and channels are most effective in promoting TTV and adjust accordingly.
Internal Training: Ensure that your sales and customer service teams understand the TTV concept and can communicate it effectively to potential customers.
Promotions and Offers: Consider offering limited-time promotions that further emphasize the quick value, such as “Sign up today and see results by the end of the week!”

By focusing on TTV in your marketing campaign, you’re addressing a primary concern for many customers: how quickly they can see a return on their investment. This approach can be especially effective in competitive markets where products or services are similar, and TTV can be a key differentiator.

Real World Example

These examples demonstrate that TTV can vary widely based on the industry and the specific product or service, but the underlying principle remains the same: it’s about how quickly customers or users can derive value from their investment. Here are a dozen real-world examples of Time to Value (TTV) across various industries:

Software as a Service (SaaS): A company offers a cloud-based project management tool. The TTV is the time it takes for a new user to set up their first project and start seeing the benefits of organized task management.
E-commerce: A customer orders a DIY furniture piece online. The TTV is the time from placing the order to assembling and using the furniture.
Banking: A customer opens a new bank account with online banking features. The TTV is the time it takes for the customer to set up their online account, make their first transaction, and experience the convenience of online banking.
Subscription Boxes: A user subscribes to a monthly gourmet food box. The TTV is the time from subscription to receiving and enjoying the first box of curated foods.
Fitness: A person joins a gym to lose weight. The TTV is the time from joining the gym to noticing the first signs of weight loss or improved fitness.
Education: A student enrolls in an online course to learn digital marketing. The TTV is the time from enrollment to applying the first learned concept in a real-world scenario.
Automotive: A customer buys a new car with advanced safety features. The TTV is the time from purchase to the first instance where the safety features actively assist or protect the driver.
Telecommunications: A user switches to a new mobile carrier for better network coverage. The TTV is the time from switching to experiencing the first clear call or faster data speeds in previously problematic areas.
Healthcare: A patient starts using a new health monitoring app. The TTV is the time from downloading the app to receiving the first set of insights or recommendations about their health.
Real Estate: A business rents a co-working space. The TTV is the time from signing the lease to the business operating smoothly in the new environment and experiencing the benefits of the shared amenities.
Agriculture: A farmer starts using a new type of organic fertilizer. The TTV is the time from the first application to observing healthier crops or increased yield.
Entertainment: A user subscribes to a streaming service. The TTV is the time from subscription to discovering and enjoying their first show or movie on the platform.

Business Goals

Business Goals Jonathan Poland Jonathan Poland //www.jonathanpoland.com/wp-content/uploads/2023/01/jp-logo.png January 1, 2023 January 1, 2023

Business goals are targets that an organization sets for itself in order to improve its overall strategy and performance. These goals are typically designed to increase profitability and enhance competitive advantage.

There are several types of business goals that organizations may set, including financial goals, such as increasing revenue or profitability; customer-related goals, such as improving customer satisfaction or loyalty; and operational goals, such as increasing efficiency or productivity.

In order to achieve these goals, organizations must develop and implement a strategic plan. This process involves conducting a thorough analysis of the organization’s internal and external environments, identifying opportunities and challenges, and setting specific, measurable, achievable, relevant, and time-bound (SMART) goals.

Once the goals have been set, organizations must work to implement and execute the strategic plan, which may involve making changes to business processes, allocating resources, and setting performance targets.

Effective goal setting and strategic planning are crucial for the success of any organization. By setting clear and achievable goals, and developing a comprehensive plan to achieve them, organizations can improve their overall performance and increase their chances of long-term success. The following are illustrative examples of measurable business goals.

Revenue

A farmer targets revenue of $400,000 with a strategy to plant several high value crops.

Overhead Cost

A company plans to reduce software licensing costs by $1.1 million by retiring a legacy system.

Gross Margins

A cafe has a goal to increase gross margins from 30% to 35% by introducing higher price menu items such as specialty coffees.

Unit Cost

An organic cereal company plans to reduce unit costs by 10% by directly purchasing several key ingredients from organic farmers.

Market Penetration

A snowboard manufacturer establishes a target of 10% market penetration with a pricing strategy designed to offer low prices to price sensitive customers.

Sales Volume

An ice cream company plans to increase summer sales volumes to 14 million units a month by expanding sales into the Mexican market with a distribution partner.

Customer Acquisition Cost

An air conditioning maintenance company plans to reduce customer acquisition cost to $1000 per contract with a sales partnership with a building management firm.

Customer Lifetime Value

An airline seeks to improve customer lifetime value to $144000 for its elite members by expanding its services at airport lounges.

Customer Churn

A cloud platform seeks to reduce customer churn to 3% for small business customers by reducing bandwidth costs that are often cited by customers as the reason they are closing their account.

Conversion Rate

A streaming music service has a goal to improve its conversion rate for website visitors signing up for an account to 3% by accepting more payment methods.

Leads

A house builder has a goal to generate 400 leads for a new development project with advertising and the launch of a local sales office.

Win Rate

A software company has a goal to improve its proposal win rate to 50% by recruiting talented sales people.

Customer Profitability

A cloud computing provider seeks to improve the value of a government contract to $66 million per year by providing value added services in areas such as security management.

Share of Wallet

An information security company seeks to improve its share of wallet to 40% for large accounts by offering a line of infrastructure products.

Productivity Rate

A software development company seeks to improve its average lines of code per day with a program that lets developers work from home three days a week if they meet productivity and quality targets.

Efficiency Rate

A bank seeks to improvement its data center infrastructure efficiency to 65% with a new cooling strategy. Data center infrastructure efficiency is the percentage of energy at a data center that is used for computing as opposed to other facility uses such as cooling.

Throughput

A bank that plans to improve the throughput of a mortgage application process from 440 application reviews a day to 880.

Cycle Time

A company targets improvement in the cycle time of order-to-delivery to an average of 47 hours.

Time to Market

A product development initiative at a bank targets a 6 month time to market for a new mortgage product.

Time to Volume

An electronics firm targets a time to volume for an innovative new camera lens of one year and one million units.

Figure of Merit

A solar panel company seeks to improve its cost per watt to $0.29 with new designs and manufacturing methods.

Diversification

A manufacturer of ceiling fans plans to diversify its product line with a number of lighting products with a target to generate 25% of revenue from the new product line within 3 years.

Customer Satisfaction

A telecom company targets a customer satisfaction rate of 55% from 35% by removing unpopular contract terms.

Customer Ratings

A hotel seeks to improve its ratings on a popular travel site from 3.2 to 4.0 by addressing the top 3 complaints in reviews with new services and policies such as a later check out time and cheaper flat rate parking prices.

Customer Loyalty

A brand of coffee targets 1 million loyal customers with a plan to aggressively position their product as the cheapest high quality organic coffee on the shelves.

Churn Rate

A software platform plans to fix several bugs and remove unpopular features to improve monthly churn rate from 4% to 2%.

Brand Recognition

A dentist advertises their clinic all over town with a target of achieving 20% top of mind brand recognition for local dentists.

Brand Image

A technology firm does a rebranding and promotional campaign to break its association with a legacy technology and establish an more modern brand image. The goal is for brand recall of 30% for the produce category software as a service.

Employee Satisfaction

An insurance company seeks to improve new employee satisfaction to 80% with a more extensive onboarding process.

Employee Retention

A restaurant owner seeks to improve one year employee retention to 80% by offering more consistent and predictable shift scheduling.

Employee Performance

A graphic design company seeks to improve employee performance with a series of training workshops. They will measure performance improvement in terms of client satisfaction with a target of 90%.

Return on Investment

A factory is expanding from two production lines to three with a target return on investment of 1400%.

Payback Period

A telecom company builds a new data center with a goal to achieve payback within 4 years.

Occupancy Rate

A hotel is investing in room renovations to improve customer satisfaction and ranking of the hotel on travel sites. The goal is to improve its occupancy rate to 94% and average price per night to $200.

Availability

A SaaS app targets uptime of 99.99% with architecture and infrastructure upgrades.

Load Time

A fashion brand redesigns its website with a target of a 3 second average load time.

User Engagement

A streaming media service seeks to improve its average user engagement to 11 hours a month by introducing new children’s shows.

Mean Time to Repair

A telecom service provider targets a mean time to repair of 35 minutes.

Returns

A manufacturer of men’s shirts has a goal to reduce returns from 18% to 5% by improving the quality of materials to produce shirts that are more opaque and less likely to wrinkle.

Risk

An airline plans to measure risk probability and risk impact for its legacy IT systems and reduce that risk by $4 million over five years with modernization projects.

Sustainability

A fashion brand plans to improve positive perceptions of its brand by switching to 100% sustainable materials that are responsibly sourced, have low environmental impact and are renewable.

What is a Turnaround Strategy?

What is a Turnaround Strategy? Jonathan Poland Jonathan Poland //www.jonathanpoland.com/wp-content/uploads/2023/01/jp-logo.png January 1, 2023 January 1, 2023

A turnaround strategy is a business plan that is implemented when a company is facing financial difficulties or declining performance. The goal of a turnaround strategy is to restore the company to financial stability and improve its performance.

There are several different approaches to turnaround strategies, including:

Cost-cutting: This involves reducing expenses in order to improve profitability. This can be done through measures such as layoffs, wage freezes, and outsourcing.
Restructuring: This involves reorganizing the company in order to improve efficiency and reduce costs. This can include reorganizing departments, streamlining processes, and introducing new technology.
Diversification: This involves expanding into new markets or product lines in order to reduce reliance on a single industry or product.
Asset divestment: This involves selling off non-core assets or businesses in order to focus on the company’s core competencies.

Implementing a turnaround strategy can be a difficult and complex process, and it requires careful planning and execution. It is important for companies to communicate openly with employees and other stakeholders about the changes being made and the reasons for them.

Essentially, a turnaround strategy is a business plan that is implemented when a company is facing financial difficulties or declining performance. It involves a range of measures designed to restore the company to financial stability and improve its performance. This typically requires fast and aggressive decisions in the context of constrained resources and large threats. The following are common examples of a turnaround strategy.

Triage

Triage is a process of quick decision making in an urgent situation. A turnaround may require large decisions to be made within hours. For example, if a trade dispute causes borders to close disrupting a supply chain, a manufacturer may have to immediately decide which operations need to shutdown.

Replacement

The practice of replacing the management of an organization or team that has generated poor results. In some cases, a management team has produced good results but an organization is at risk of failure due to external factors such as a disaster or economic collapse. A replacement strategy may still be used where management has performed well. This is typically done where it is felt that insiders are likely to hold tightly to the status quo of the organization.

Business as Usual

Business as usual is a basic principle for managing drastic circumstances whereby people are asked to continue with their work without becoming distracted by events of the day. For example, an airline with a drastic cut in revenue due to an adverse global event may ask employees to continue on without loss of enthusiasm despite pending job cuts.

Retrenchment

Retrenchment is the process of reducing an organization including elements such as departments, teams, products, regions and business functions. This is a painful process that is often nonetheless necessary for the survival of an organization. For example, a firm that is facing a liquidity crisis may be able to secure additional funding based on the condition that they reduce costs by 40%. From an optimistic viewpoint this can be considered a process of creative destruction.

Repositioning

Repositioning is the pursuit of creativity and innovation to find a leap forward that saves an organization. For example, an oil company that repositions itself as a solar energy firm that produces energy at great scale and low cost.

Renewal

Renewal is the pursuit of a long term strategy that will eventual pay off in significant ways. Once a firm stabilizes its finances a turnaround begins to invest in the long term goals of the organization. For example, an oil company that begins to recruit talent who can realize a shift to green energy.

Culture Shift

The process of changing the culture of an organization. For example, shifting from a culture of resistance to change where people find excuses not to do things to a culture of aggressive change where people find ways to speed things up.

Retrenchment Strategy

Retrenchment Strategy Jonathan Poland Jonathan Poland //www.jonathanpoland.com/wp-content/uploads/2023/01/jp-logo.png January 1, 2023 January 12, 2023

Retrenchment is a business strategy that involves reducing the size or scope of a company in order to improve efficiency and competitiveness. It is typically used when a company is facing financial difficulties or is in a declining market, and it can involve measures such as layoffs, downsizing, or divestment of non-core assets.

There are several different approaches to retrenchment, including:

Cost-cutting: This involves reducing expenses in order to improve profitability. This can be done through measures such as layoffs, wage freezes, and outsourcing.
Restructuring: This involves reorganizing the company in order to improve efficiency and reduce costs. This can include reorganizing departments, streamlining processes, and introducing new technology.
Divestment: This involves selling off non-core assets or businesses in order to focus on the company’s core competencies.
Diversification: This involves expanding into new markets or product lines in order to reduce reliance on a single industry or product.

Retrenchment can be a difficult and controversial strategy, as it often involves layoffs and other measures that can impact employees and stakeholders. It is important for companies to carefully consider the potential impacts of retrenchment and to communicate openly with employees and other stakeholders about the reasons for the changes and the plans for the future.

In conclusion, retrenchment is a business strategy that involves reducing the size or scope of a company in order to improve efficiency and competitiveness. It can be an effective way for companies to navigate difficult financial times or declining markets, but it is important for companies to carefully consider the potential impacts and to communicate openly with stakeholders. The following are illustrative examples of a retrenchment.

Selling Assets

Selling assets such as investments, facilities, machines or entire divisions of your organization. For example, an airline facing a liquidity crisis that sells its facilities at a key airport.

Abandoning Markets

Abandoning a particular market location or segment. For example, an investment bank that closes its Tokyo office when markets crash and the business becomes unprofitable.

Abandoning a Line of Business

Closing an entire line of business such as an insurance company that stops selling flood insurance after a major flood.

Decreasing Production

Decreasing production of a product such as an automobile manufacturer that closes or idles a factory to respond to a fall in demand.

Eliminating Redundancies

Layoffs in areas that are perceived as non-critical or low value are often referred to as redundancies. For example, a bank that has grown a large layer of middle-management who have abstract job titles not directly tied to revenue or critical operations may aggressively cut these positions when revenue declines.

Downsizing

Downsizing, also known as layoffs, is the process of terminating employees through no fault of their own. This is often done in response to business conditions whereby a firm seeks to conserve resources to survive. In some cases, a firm seeks to downsize without exiting any markets or businesses. For example, a firm may require all departments to cut 10% of their staff without any changes to the responsibilities and goals of these departments.

Outsourcing

The process of assigning a business function or process to an external partner, often to reduce costs. Outsourcing is only retrenchment when it is done urgently. For example, an IT company that suddenly sells its data centers and outsources to the company that purchases the data centers to generate cash in a crisis.

Decision Framing

Decision Framing Jonathan Poland Jonathan Poland //www.jonathanpoland.com/wp-content/uploads/2023/01/jp-logo.png January 1, 2023 January 12, 2023

Decision framing refers to the way in which a choice or dilemma is presented or structured. This includes the language used to describe the options, the context in which the decision is made, and any additional information that is provided. Decision framing can be used to influence the decision-making process and the choices that are made. It can also be used to improve the quality of decisions by providing decision-makers with the necessary information and context to make informed choices. The following are common types of decision framing.

Preserving Ambiguity

Preserving ambiguity is the idea that a decision statement be as wide open as possible in order to allow for creative decisions. This principle can be applied throughout the decision making process to avoid imposing assumptions and constraints too early. For example, a decision statement such as “what type of park should we create?” assumes that a particular area will become a park. A statement such as “what type of public space should we create?” leaves open more possibilities.

Creativity of Constraints

Creativity of constraints is the idea that well designed initial constraints can improve creativity and efficiency. For example, a decision statement such as “how should I get an education without paying any tuition?” is far more difficult to answer than “where should I go to university?” As such, the more constrained decision statement requires more creative alternatives. Constraints can be added and removed from a decision statement to generate alternatives. For example, “what university program should I choose with the constraint that it needs to pay for itself with higher salary prospects within 5 years?”

Positive Framing

Framing a decision in an optimistic light. For example, “what steps should we take to delight every customer?”

Negative Framing

Framing a decision in an pessimistic light. For example, “what should we do to prevent customer defections given that our products are lower quality than the competition?”

Overcomplexity

A decision that is framed with complex language and structure such that a regular person has trouble understanding it. For example, a legal agreement for software that needs to be accepted by every user that contains complexities that only a lawyer would fully understand.

Choice Architecture

Breaking a decision into a series of successive choices with a structure. Often used to influence. For example, a marketing page for a bicycle may begin by asking you to select a color and then proceed to selecting a model and options. This can result in escalating commitment on the part of the customer.

False Dichotomy

A false dichotomy is an incorrect assertion that a decision is between two alternatives when more options exist. For example, do we want to compete on price or quality?

False Alternative

Misrepresenting an alternative. For example:
Do you want to subscribe to our investing newsletter?
✓ Yes ✘ I want to invest recklessly without being informed

Decoy Framing

Placing an obvious bad choice in a list of alternatives. This is commonly done in price lists. When customers see that one price is better than the others they may feel an impulse to buy.
Ice Cream Cones
1 cone – $3
2 cones – $8
5 cones – $10

Content Database

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